Poppies! I blame the poppies for the slow housing start this year. People couldn’t get to the region to buy houses because of the poppypalooza or the apoppycalypse or whatever you call it. But it truly was spectacular and another reminder why, if you’re going to live in California, this isn’t a bad place to be. Now the poppies will snooze for a few more years and we can get back to the business of housing.
February sales were up 12% from January and this month was up another 24% (663 / 874). But last March we sold 926 homes so our 1st quarter numbers for the region show us running about 6% behind last year (2,256 / 2,120) and some 13% off the pace of 2017 (2,434). That’s the slowest start to the year since 2007! Pending sales are up another 24% coming in to April so we’ve got momentum coming into the prime buying season, but don’t expect anything spectacular this year.
And we’re not alone in this. After dropping 3.2% last year, our forecast for the state has sales declining another 6.9% this year. Even if the stars all align, sales could still drop 3.3% this year, and if the stars don’t cooperate – a 10.4% drop. The national forecast isn’t much better but does show a very slight 2.4% increase in sales this year with a 4.4% increase in 2020. No recession on the horizon.
Median price across the region grew during the 1st quarter but at the slowest pace in his last decade – appreciating just 2% over Q1 2018 ($365,975 / $373,972). After logging increases of 9.5% on average during the past 7 years, a 2% bump is hardly noticeable. Temecula’s median price is actually down 1% year-over-year and five of our local cities either dropped year-to-year or held even. Also, interesting to note that over 40% of recent sales occurred following a price reduction. Sellers are still optimistic in setting their initial asking price but reality sets in when it comes to actually selling the property.
Average price across the region fared somewhat better, up 6% for the quarter ($376,740 / $394,988) as more $1 million+ homes sold in March boosting the quarterly average. 9 homes over $1 million sold in Temecula, 4 in Murrieta and 2 in Canyon Lake. Sales of upper end homes adds to the average price while having a minimal impact on the median – but it’s still a good indicator of overall market health.
So sales are down and prices are flat at best. What does that mean for the market? Well, if the trends continue it means a less competitive market, homes staying on the market longer, fewer multiple-bid situations, more buyer choice for those buyers active in the market. Generally. But while some of this is playing out locally, the average home actually stayed on the market 12% fewer days in March than in February (38.6 / 29). Inventory did increase slightly adding 3% (2,270 / 2,347), but that was more than offset by the 24% increase in sales, dropping our months inventory by 21% month-over-month (3.4 / 2.7).
Housing affordability across the region and the state continues to decline but slowing price appreciation coupled with a recent drop in mortgage interest rates may spur more buyers to test the market this spring. The Fed’s recent decision to hold further rate hikes is good news for the market as well, and there are those who foresee a possible Fed rate drop by mid-year to keep the economy from flagging. We continue to add jobs to the economy with our region being one of the bellwethers in California, and this is being accompanied by wage increases as well. All good signs for the economy and housing. It should be a decent year, but not a record-setter. That’s OK – I’ll settle for solid.
Now, if we could only reign in our worst tax and regulatory impulses in Sacramento.
Gene Wunderlich is Vice President, Government Affairs for Southwest Riverside County Association of Realtors. If you have questions on the market, please contact me at GAD@srcar.org.